4-hour timeframe
Technical details:
Higher linear regression channel: direction - upward.
Lower linear regression channel: direction - downward.
Moving average (20; smoothed) - downward.
CCI: 75.9202
The EUR/USD currency pair continued to trade very calmly on Thursday, June 24. In principle, nothing is surprising since all the markets' attention was shifted in favor of the Bank of England meeting. As it turned out later, the advances that were issued by the BA were not justified since all the key parameters of monetary policy remained unchanged. However, it should be recalled that both the ECB and the Fed also left their monetary policy unchanged and also refrained from voicing clear plans to change it. Thus, the European currency has recovered to the moving average line and will try to gain a foothold above it. We have repeatedly said that we expect a new round of weakening of the US currency, despite the pair's recent fall by 250-300 points. The only thing that should be noted without fail is low volatility. The illustration below clearly shows that most of the last 30 days ended with a volatility of no more than 60 points. Thus, it isn't easy to trade the pair within the day recently. It should be understood that the movement of 60 points is a movement in 24 hours from the minimum point to the maximum. In reality, it is never possible to open a deal at the lowest point and close it at the very top. Thus, much more real volatility is, in most cases, 40 points. On the 4-hour timeframe, the movement of the last days is visible in contrast to the fall at the end of last week. And before the Fed meeting in the US, the pair was in a very narrow trading range for about a month. This range and the bulls' inability to push through it leads us to believe that this was not the last attempt to continue the formation of an upward trend. We remind you that none of the global factors that have raised the pair so high in the last year and a half have changed recently. Moreover, now that all three meetings of the central banks have been left behind, we can conclude that the monetary policy of the regulators has not changed either.
By and large, no changes were made to the monetary policies of the ECB and the Fed at all. The programs of stimulating the economy remained in operation, their terms did not move, and the volumes remained the same. It's even somehow blasphemous to talk about betting now. They haven't changed either. After both meetings ended, both Jerome Powell and Christine Lagarde did not tell the markets anything that could be called "upcoming tightening" or "strengthening of the hawkish mood." Yes, the Fed raised its forecasts for GDP and inflation, reduced the unemployment rate, and the number of members of the monetary committee who expect a rate hike next year increased to 7 out of 19. That is why we have repeatedly drawn the attention of traders that the markets' reaction to the last meeting of the Fed was somewhat excessive. As for the ECB, there is nothing to talk about because Christine Lagarde says in almost every speech that the European economy is still too weak and cannot do without stimulus. No one is talking about betting in Europe right now. The Bank of England left everything unchanged at all, without even adjusting the GDP forecast. However, traders responded to the Bank of England meeting by selling the pound and to the Fed meeting by buying the dollar. Thus, the only difference between the Fed and European regulators is the phrase "the Fed is ready to start discussing the curtailment of the quantitative stimulus program," which in America is at least $ 120 billion a month. Because of this phrase dropped by Jerome Powell, the US currency rose by 250 and 300 points against the euro and the pound, respectively. At the same time, at his next speech to the US Congress, which took place this week, Jerome Powell did not say a word that the Fed was going to discuss something there.
Thus, by and large, the rhetoric of all three central banks practically did not differ from each other. On the contrary, Jerome Powell spoke about maintaining monetary stimulus. He pointed to the uneven recovery of the economy, the decline of some of the sectors most affected by the pandemic, and the long-term recovery of the labor market to its pre-pandemic levels, which is now the main goal of the economy Fed. How can we expect a sharp change in the trend in such conditions?
It is based on these considerations that we believe that the US currency will resume its decline. The global dollar trend is over. The Fed continues to pour hundreds of billions of dollars into its economy. The US Congress is preparing to adopt a budget for 2022, which provides for spending three times more than a year earlier. Inflation is growing. From our point of view, all these factors will continue to put pressure on the US currency. Plus, do not forget about the technical factors. Sometimes, when the markets cannot find the strength to overcome a certain level for a long time, they slow down the onslaught for a while, the price rolls back in the opposite direction, after which trading on the trend begins with new strength. It allows us to overcome the "reinforced concrete level." Thus, it is possible that in the last week, traders allowed the euro/dollar pair to take overclocking, as they realized that the level of 1.2242 could not be overcome just like that. Thus, we favor continuing the upward movement. However, we also assume that within the framework of a global correction, another round of downward movement may follow approximately to the area of the 17th level.
The volatility of the euro/dollar currency pair as of June 25 is 62 points and is characterized as "average." Thus, we expect the pair to move today between the levels of 1.1865 and 1.1989. A reversal of the Heiken Ashi indicator downwards signals a new round of downward movement.
Nearest support levels:
S1 – 1.1902
S2 – 1.1841
S3 – 1.1780
Nearest resistance levels:
R1 – 1.1963
R2 – 1.2024
R3 – 1.2085
Trading recommendations:
The EUR/USD pair continues to adjust. Thus, today it is recommended to open new short positions with targets of 1.1865 and 1.1841 if the price bounces off the moving average line. It is recommended to open buy orders now no earlier than fixing the price above the moving average line with targets of 1.1989 and 1.2024.
